Sainsbury's recently began scrapping multi-buy promotions and has ditched its brand-match guarantee in favour of overall lower prices.

The big four supermarkets have been engaged in a fierce battle for customers in recent years, slashing prices as they struggle with waning customer loyalty and the march of discounters Aldi and Lidl.

In May, Sainsbury’s reported a near 14 per cent fall in pretax profits to £587million for the year to March.

Clive Black, analyst at broker Shore Capital, said the first quarter sales update from Sainsbury's was 'marginally disappointing but far from a car crash'.

Mr Coupe did give some hope of an easing in the food price deflation that has been hitting the sector hard, saying it is now running at around minus 1 per cent against falls of up to 2.5 per cent last year.

Share this article

HOW THIS IS MONEY CAN HELP

But Sainsbury's believes food price deflation will continue until at least the autumn.

However, its clothing arm is helping offset the food price woes, with sales growth of nearly 5 per cent in its first quarter.

This month's Euro 2016 football championship could also provide a boost.

Mr Coupe said: 'If the sun shines and it's a barbecue weekend, we tend to see a spike in business.

'But the weather is likely to play more of a part overall in its summer trading'.

Sainsbury's said it was already receiving a Euro 2016 fillip, with strong sales of its football- inspired menswear range.

The group added that the vinyl record comeback was also helping its non-food sales, with the chain now the biggest vinyl retailer on the high street, with an 8 per cent market share. It reintroduced vinyl records after 25 years in March.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: 'Football can bring profits home for retailers, and Sainsbury's is one of the companies benefiting from consumer activity ahead of the forthcoming European Championship.

'Make no mistake though, things are still tough on the high street. Food price deflation is still depressing grocery sales, and the discounters Aldi and Lidl are still nibbling at the big supermarkets' heels.'

The first quarter update comes as the group's £1.4billion takeover of Argos owner Home Retail Group faces scrutiny from the competition watchdog.

The Competition and Markets Authority said last month it was looking into whether the tie-up with Argos owner Home Retail could result in a 'substantial lessening of competition'.

It will consider comments on the deal and decide whether to launch an inquiry by July 25

Agenda: Sainsbury's boss Mike Coupe is also busy with the takeover of Argos owner Home Retail Group

John Ibbotson, director of the retail consultancy, Retail Vision, said: 'Sainsbury’s fall in like-for-like sales has brought to an end two years of modest sales increases and shows that it cannot escape the deeper malaise affecting the UK grocery sector.

'The shift to a medium-low pricing strategy has kept it in the game, but lacking the economies of scale enjoyed by the rest of the Big Four, Sainsbury's is running out of road.

'Tesco, Asda and Morrisons have all put their houses in order and have taken the necessary action of cost cutting and fundamental business reorganisation.

He added: 'The Argos acquisition could boost its bottom line in the short-term as well as improve the grocer's internet offer and logistics capability.

'But the monumental task of integrating the two businesses could also prove a toxic distraction for Sainsbury's from the core business of grocery retailing.'

Investors’ hopes that the big supermarkets’ struggles were easing were dashed last week with new figures showing that they were still losing ground to both high and low-end rivals.

The Kantar Worldpanel figures showed Sainsbury’s sales dipping 1.2 per cent in the three months to May – the supermarket’s worst performance since this time last year.

Tesco sales were down by 1 per cent, the smallest decline of the big four grocers.

In contrast, Asda sales fell by 5.1 per cent and Morrisons sales declined by 2.1 per cent.

Retail experts say that rather than turning their backs on the big four completely, shoppers are instead spreading their spending around more

Kantar's figures show shoppers are sharing their spending around retailers, but not turning their backs on the big four entirely.

Edward Garner, director at Kantar Worldpanel, said: 'While the big four are struggling to keep their market share what's clear is that consumers aren't flocking away from their stores - their combined shopper numbers have dropped only 0.2 per cent in the latest 12 weeks.

'In fact, 94 per cent of Aldi and Lidl shoppers still visit at least one of the four major retailers every four weeks.'

Garner added: 'Consumers' spend is increasingly being shared with other growing outlets which also include Waitrose, the Co-operative and Iceland and average household spend for the big four has dropped by 2.9 per cent.'

The fight for customers has seen grocery prices cut, something which has contributed to keeping consumer prices inflation low.

British Retail Consortium chief executive Helen Dickinson described last week’s figures as ‘deflationary’.

She said: 'We've experienced a record run of falling shop prices and, for the time being, there's little to suggest that'll end any time soon - so the good news for consumers continues.

'Indeed, with food prices remaining flat at the same time as wages continue to grow means customers will have yet more money in their pockets at the end of their weekly shop.

'Looking slightly longer term, we know that the recent commodity price increases will start to put pressure on retailers to raise their own prices.

'We would normally expect these input costs to filter through to prices eventually, but the big question is how far fierce competition in the industry will insulate consumers from price increases.'